By 2015, half of the world’s poor (those that live on less than US $1.25 a day) will be living in fragile states. Fragile states experience high levels of conflict, inequality, and poverty and have become a serious security and development concern for the international community. Decreasing poverty is a difficult challenge in any environment- but it becomes especially problematic in fragile states, partly because these states are particularly susceptible to corruption.

Afghanistan and Sierra Leone, both low-income fragile states, receive large amounts of international aid and – recently – increasing global attention due to aid misuse. Afghanistan and Sierra Leone are, respectively, the 6th and 9th most aid-dependent countries in the world; simultaneously, Afghanistan is ranked the most corrupt country in the world (Sierra Leone is ranked 123rd out of 176). Both countries also have high levels of poverty and poor health statistics.

Perception of corruption around the world.

After peaking in June 2011, the number of U.S. forces in Afghanistan is decreasing in preparation for the scheduled troop removal in 2014. It is important to know, however, that the United States’ financial commitment to Afghanistan’s reconstruction is not as easily withdrawn as the ‘boots on the ground.’ As of September 2013, the United States has contributed $96 billion to reconstruction efforts in Afghanistan. Since Afghanistan’s dependence on foreign aid is likely to continue for the foreseeable future, it is likely that U.S. contributions to the Afghani government will continue at current levels, $10 billion per year.

U.S. aid to Afghanistan needs a “comprehensive strategy to reduce corruption, a mechanism to track long-term progress on efforts and evaluate achievement of goals and objectives” to be successful and efficient.

A report by the Special Inspector General for Afghanistan (SIGAR) found that U.S. anti-corruption activities in Afghanistan were vulnerable to misuse because no comprehensive anti-corruption strategy exists. Corruption is common and widespread in Afghanistan; a United Nations Office on Drugs and Crime report showed that, in only 12 months, Afghan citizens paid $2.5 billion in bribes (about 23% of Afghanistan’s GDP for that year), most commonly to police and judicial officials. According to the SIGAR report, U.S. aid to Afghanistan needs a “comprehensive strategy to reduce corruption, a mechanism to track long-term progress on efforts and evaluate achievement of goals and objectives” to be successful and efficient.

Sierra Leone’s decade-long civil war ended years ago, but corruption has lingered and affects all aspects of life and development. Like Afghanistan, Sierra Leone is extremely dependent on foreign aid; in 2009, Sierra Leone’s government relied on foreign aid for 60% of its budget. The country has made progress in its anti-corruption campaign, but there have been some major setbacks. In 2007, “Britain, the former colonial power and biggest donor, ended direct budget support for the government and refused to give any more money to the ineffectual Anti-Corruption Commission (ACC).”

After an internal review and subsequent audit showed high rates of misuse of funds, GAVI suspended $530,000 of pledged aid (funds that were supposed to be used for health systems strengthening in Sierra Leone). The misuse of GAVI funds seems to have been widespread across rural and urban areas. The audit showed that health workers took money and then could not show what it had been spent on, records were not kept for 23 of the Health Ministry’s 55 bank accounts, and doctors and nurses had been charging for drugs and services that, under these funded programs, should have been free.

These narratives are parallel in many ways. Fragile countries have inherently weak systems – that’s what makes them fragile. Both sets of funds were, in theory, supposed to help strengthen these systems to make the recipient country’s government, economy, and society stronger and less vulnerable. But corruption and a lack of transparency made these financial flows ineffective, perhaps even counterproductive.

Aid to fragile countries, as these stories have shown, is particularly vulnerable to corruption and widespread misuse, especially when large amounts of funds pour into impoverished areas. This means that strategies should be put in place around the world to prevent corruption, encourage transparency, and catch misuse in early stages- to protect private and public funds meant to help the global poor.

2 thoughts on “Corruption: A Threat to International Aid in Fragile Countries”

JeffSeptember 25, 2013 / 12:19 pm

Accountability… How we use handouts or “freebies” depends on the amount of accountability we face for their use. Corruption is the same. Then, how do we get accountability?
(1) Formal methods for generating accountability (e.g. organizations using records of spending to track cases of corruption) are definitely needed (though difficult to implement in countries like Sierre Leone, where witchcraft is still persuasive in medicine).
(2) Psychological/moral methods of enforcement (e.g. a situation in which each transfer of money occurs between parties that have a relationship and a mutual understanding of the donors’ expectations) can be helpful too. I think an interesting psychological factor that makes us feel more accountable for our actions is our relationship to the donor. What’s the difference between $100 from a foreign aid organization vs. your local church community or your school system or your family members? Essentially, how close you are to the giver.

Counterintuitively, increasing this second type of accountability implies that more transfers would be needed to ensure that there is a direct relationship between the donor and recipient. and more transfers = more opportunities for corruption. But what I imagine is that the number of transfers would increase naturally and beneficially as aid organizations (dare I say it) micromanage how their funds get used a little more… have more clearly defined goals for each transfer and somehow implement better data collection and auditing in these areas (obviously tough).

Can this strategy make a dent in corruption? I don’t know. And Whether these organizations have the resources to monitor these transfers, or whether trying to fight corruption is even a economically viable undertaking for the organizations are open questions…

The Center for Global Prosperity is focused on educating policy leaders and the general public on the crucial role of the private sector (both non and for profit) as a source of economic growth and prosperity around the world. To accomplish this central mission, the Center produces The Index of Global Philanthropy and Remittances, which identifies the sources and amounts of private giving around the world and The Index of Philanthropic Freedom, which identifies the barriers and incentives to private giving in 64 countries.